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Industrialists warn against reduction of import tariffs

East African Standard, Nairobi

Industrialists Warn Against Reduction of Import Tariffs

By Benson Kathuri, Nairobi

May 4, 2007

Local manufacturers have rebuffed calls by the International Monetary Fund (IMF) for a reduction of import duty.

Led the Kenya Association Manufacturers (KAM) vice-chairman Mr Vimal Shah, the industrialists said reduced external tariffs would wipe out gains in the sector.

"Africa is not a low cost production region and lowering import duty would expose the continent to unfair competition from efficient producers mainly from Asia," Shah said during a press briefing in Nairobi on Thursday.

Goods and equipment used for production imported into the East African Community under the customs union attract no duty.

Some raw materials and semi-finished goods attract 10 per cent duty while all finished luxury goods are charged 25 per cent duty.

The same rating will also apply in the 20 Common Market for Eastern and Southern Africa (Comesa) countries by December next year when they launch a customs union.

Shah is also the chief executive of the Thika-based Bidco Oil Refineries Company that has a big presence in the region.

He said the tariff issue will be discussed at a business forum organised by the association during the Comesa Heads of States summit that opens in Nairobi next week.

Ten Heads of State are expected to attend the summit that will also discuss the European Union sponsored Economic Partnership Agreements (EPAs).

Most Comesa members except Egypt, Libya and Tanzania are negotiating EPAs that will develop a new trade pact to replace the existing Cotonou agreement between the EU and the 79 African, Caribbean and Pacific countries.

Shah said the private sector in the region would also lobby the leaders to speed up the implementation of the proposed Comesa customs union to be effected by the end of next year.

In its economic outlook for the sub-Saharan Africa launched in Nairobi on Wednesday, IMF argued that high tariffs encouraged tax evasion.

But Shah, who was franked by KAM chief executive officer Ms Betty Maina, said duty for finished imported products should be raised to 30 per cent.

Maina said local industries are operating at 40 per cent capacity due to the influx of cheap imports in the market.